DMRC Enterprises v. Este Del Sol Mountain Reserve (G.R. No. L-57936)

Facts:

Petitioner DMRC entered into an agreement with respondent where the former would lease its heavy equipment on the condition that the latter would advance a certain sum and 30% of the collection would be invested in the purchase of shares of stock of DMRC. As a result of the agreement, DMRC performed its obligation but respondent despite repeated demands to it, refused to comply. Thus, petitioner filed a complaint before the trial court. Respondent moved to dismiss on the ground that since the nature of the suit involves intra-corporate matters, it is SEC that has jurisdiction. Trial court found for respondent.

Issue:

Whether or not the suit involves intra-corporate controversy cognizable by SEC.

Ruling: NO.

A perusal of the complaint, styled “sum of money “, shows that the case at bar does not involve intra-corporate matters as to make it fall within the original and exclusive jurisdiction of the Securities and Exchange Commission. It is clear that petitioner DMRC has no intra-corporate relation with the respondent corporation. Nor can petitioner’s cause of action be said to involve or arise from an intra-corporate matter. The complaint merely states that a contract of lease of heavy equipment was entered into by the parties and that respondent lessee failed to pay the agreed consideration for said lease, and petitioner now seeks to enforce the contract seeking payment under the Civil Code of the Philippines. It must be stressed that the plaintiff-petitioner submitted himself to the jurisdiction of the lower court as creditor and the respondent did so as debtor. The fact that the case involves shares of stock to be used as payment for lease rentals does not convert it into an intra-corporate controversy. In fact, the greater of the petitioner’s claim is in terms of cash or money or pass upon a money claim under a lease contract would be beyond the competence of the Securities and Exchange Commission.

Further buttressing the petitioner’s stand is the fact that it is not a shareholder of the respondent corporation, no transfer or registration of shares having been made in its name yet. Precisely, the petitioner prays that it be made a stockholder of the corporation by virtue of the agreement in the lease contract. Hence, there can be no intra-corporate controversy between a stockholder and the corporation in the case at bar. It must be remembered that a determination of the rights of the parties under the contract is necessary before any mention can be made of the issuance of shares of stock. Petitioner must first be shown to be entitled to its claim under the disputed contract. Such a determination falls under the jurisdiction of the Regional Trial Court, particularly as it involves not only a question of issuance of shares but more so, the interpretation of a contract of lease and a claim for a sum of money under the said contract. Only after a finding of entitlement and the implementation according to the contractual terms may the Securities and Exchange Commission assume jurisdiction in case a question later arises regarding said shares. To enforce the basic contract is clearly beyond the power of the Securities and Exchange Commission and would be excess of jurisdiction if it were to act thereon.

*This is a case falling under the old rule where SEC had jurisdiction over intra-corporate disputes.

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